As a former Executive Director of the World Bank I know that the columnists of the Financial Times have more voice than what I ever had, and therefore they might need some checks-and-balances.
Currently, having probably trampled on some delicate ego, I am a persona non grata at FT.
Would the child shouting out “the Emperor is naked” have his observation published in FT? Does the child need a PhD for that?

For more see "A Blog is Born" at the very bottom.

April 27, 2012

Sir, as a former Executive Director of the World Bank, 2002-2004 I would like to add to the many insightful comments of Sarah Murray, on the difficulties of being a president of a World Bank, “Leaders face a set of complex challenges” April 26.

As I see it, and in much as I experienced it, the real problem of the World Bank is that, at its Board of Executive Directors, the World at large, and its humans, are not truly represented, only parochial governmental interests are.

If we are going to have a chance to rally support for such global critical issues as world-wide sustainability and job creation for our youth, I do believe we need some sort of World’s World Bank, and, a good start, just for starters, could be adding to the Board some independent voices who do not report to a government, or, much worse, to a single ideology.

Would such a proposal be feasible? I haven’t the faintest! But, if we cannot get the human beings to cooperate and work as one, on some vital issues, across the borders, our chances of all humans making it are much reduced… let’s not kid ourselves.

April 25, 2012

Sir, part of the problems with banks is that those same regulators who should have required equity from the banks when these placed sovereign loans on their books, but did not, because the regulators wished to consider these sovereigns as infallible, are now dumb enough to require the banks to immediately adjust to the fact that the sovereigns might not be so infallible after all. In other words, the banks are forced to deleverage, which hits of course the most those who require the most of bank equity, namely the officially decreed as risky, namely the small businesses and entrepreneurs, namely those least responsible for this crisis.

In a period where countercyclical action is required, new bank equity should be raised to support new lending and not to cover capital requirements for old bad lending. But, even though Martin Wolf now begins to admit the need “to break the adverse loop between subpar growth, deteriorating fiscal positions, increasing recapitalization needs, and deleveraging”, he still refuses to do a full Monty disclosing the regulatory stupidity, probably because he does not want hurt his buddies, “Banks are on a eurozone knife-edge” April 25.

Of course, it also reflects the fact that Martin Wolf, the chief economics commentator at FT, from an ideological point of view, much rather prefers government bureaucrats to run the Keynesian deficit spending he favors, than allowing the banks to allocate those resources without the interference of regulating bureaucrats.

Yes banks are indeed on a eurozone knife-edge, but we surely need to look more into who placed them there and who keeps them there?

Sir, John Plender is absolutely correct when he identifies the officially “risky”, the emerging economies of eastern Europe and small and medium sized businesses, already penalized by the Basel capital regime, as the biggest victims of the ongoing deleverage, “Europe faces vicious circle of disorderly bank deleveraging” April 25.

The World Bank and the IMF during their recent spring meetings were all dressed up in signs that asked about “reducing gaps”. And indeed, one gap that surely needs to be closed, and where the World Bank and the IMF should be at the forefront, is the one odiously increased by senseless bank regulators, between those perceived ex-ante as “not-risky” and those similarly perceived as “risky”.

Unfortunately no one made a big point of this during these spring meetings as they were all busy talking about the scarcity and the need of “safe-assets”. Clearly, those perceived by the regulators ex ante as “risky”, in Europe, are a new class of untouchables.

April 19, 2012

Sir, what a shame to read that old brave England thinks it too risky to row a boat up the Thames… what is this wimpy England now to do, for instance when the International Monetary Fund (so surrealistically) announces a scarcity of safe assets?

Sir, El Salvador, Ecuador and some other countries, use the US dollar and I cannot remember them asking the US for any permissions to do so. If Greece goes into total default, perhaps it could still decide to use the Euro, it could be of great interest to them.

April 17, 2012

Sir, no matter where you look in the developed world, you will find dangerous obese bank exposures to what was or still is officially perceived as absolutely not risky, like what was or is triple-A rated and the “infallible” sovereigns; and for the society equally dangerous, anorexic bank exposures to what is officially perceived as risky, like small businesses and entrepreneurs. Nevertheless the bank regulators insist on discriminating against ex-ante perceived risks.

In this respect, when Robert Zoellick in “Europe is distracted by endless talk of firewalls” April 17, writes that “the survival of the eurozone now depends on Italy and Spain”, but, instead of trying to figure out how their private banks could help out, he recommends a minor capital injection in the European Investment Bank, I can´t help but to feel that the real survival of Italy and Spain (and Portugal) will, in its turn, depend on what the Italians and Spaniards (and Portuguese) can manage to do in their more real and less distorted shadow economies.

April 14, 2012

Banks consider the perceived risks of default of borrowers when setting the interest rates, the amounts of the loans and all other terms. Therefore, to also favor with bank regulations bank exposure to what is officially perceived as absolutely not risky, like triple-A rated and infallible sovereigns, and thereby castigating their exposure to what is officially deemed as risky, like small business and entrepreneurs, dooms the banks to dangerously obese exposures to the “not-risky”, and to the for the economy equally dangerous anorexic exposures to the “risky”. And that, no matter how you look at it, is plain stupid bank regulations.

Since FT has clearly, and I would say deliberately ignored the previous argument, about which I have sent FT over 600 letters the last 7 years, I find it absurd when in “Lost in translation”, April 14, FT expresses that it has “always favored intelligent banking regulations”

For example just earlier this week Martin Wolf wrote, for the umpteenth time, about balance of payment problems in Europe stating “In the years of euphoria before the financial crisis private capital flowed freely [to] Greece, Portugal and Spain”, and again completely ignoring the fact that these capital flows were actually much pushed by the dumb capital requirements for banks, “Why the Bundesbank is wrong”, April 11.

No wonder Margaret Atwood can express so much bile against powerful uncontrollable and unaccountable private sector Gods of high finance, “Our faith is fraying in the faceless god of money” April 14. No one has cared to inform her that without the stupid bank regulations there would have been no market for those bad mortgages she rightly abhors. No one has cared to inform her that those who really played Gods, and with immense hubris thought themselves risk managers of the world, were the bank regulators, and who now, instead of being held accountable, for instance for Basel II, are in charge of producing its sequel Basel III, which, by the looks of it, will just dig us all deeper in the hole.

April 12, 2012

Sir, Robin Harding reports that “IMF warns on threat posed by shortage of safe assets”, April 12, and it amazes me how an organization like that, and bank regulators, fail to understand that just defining an asset as “safe” starts eroding its safety. Has this crisis which resulted exclusively from obese exposures to assets officially considered as absolutely safe gone unsafe not taught them anything?

Not only did the capital requirements for banks based on perceived risk create an artificial demand for safe assets but now they are stoking that fire when, for liquidity purposes, the “regulations are increasing the demand for safe securities from banks”

It is truly scary how these experts can be so naïve. Not only do their regulations guarantee the dangerous overcrowding of any safe havens but also, if the demand for safe assets outstrips the supply, they should know the market will deliver Potemkin type safe assets… and that’s life!

Again, an asset can only remain safe as longs as it is believed it could foreseeable turn unsafe!

April 05, 2012

Sir, Paul Tucker, a deputy governor of the Bank of England holds that “Stability comes before the good things in life”, April 5. Wouldn´t he, typical bank nanny, many other would hold that stability, like in the grave, comes last in life.

Jest aside, when he writes that the Financial Policy Committee should not use bank capital weights to try to steer the supply of credit to achieve other objectives than stability, as “this is not an exercise in economic or social engineering”, I would just ask if forcing risk-taking out of our banks is not just an exercise in economic engineering?

The more you allow the economy and the financial sector to shake rattle and roll, the more stable and productive it will be. It is when regulating busybodies interfere, like with setting the capital requirements for banks based on risk, even though theses perceived risks have already been cleared for with interest rates and others… that they doom the banks to overdose on perceived risks and to end up with dangerous obese exposures to what is or was considered as absolutely not risky, like triple-A rated securities and infallible sovereigns, and with anorexic exposures to what is officially considered as risky, like small businesses and entrepreneurs.

Sir, we sometimes hear about that “if the developed rich countries get a cold, the non-developed poor countries get pneumonia”. But what, when the rich countries get pneumonia?

The regulators who based their capital requirements for banks based on perceived risks, even though theses perceived risks were already cleared for… caused a monstrous crisis by making the banks overdose on perceived risks, and end up with dangerous obese exposures to what is or was considered as absolutely not risky, like triple-A rated securities and infallible sovereigns, and anorexic exposures to what is officially considered as risky, like small businesses and entrepreneurs.

As a result, at this moment, I believe it is more important than ever for the World Bank, as the world’s premier development bank, to remind the whole world, especially the rich developed countries, about the importance of risk taking and the dangers of excessive risk-avoidance.

I say this because I am not really sure that Jose Antonio Ocampo is referring to this “brave” in his “My pitch to build a brave new World Bank”, April 5.

I support the candidacy of Ms. Okonjo-Iweala, but I trust my former colleagues will make the best election based on the merits of all candidates, and Ocampo certainly has many, but, that is as long as Executive Directors remember that when doing that they are, according to the statutes of the bank, responsible as individuals… and so no hiding behind the skirt of “my government told me so”

Ps. I just saw a letter signed by 100 economists supporting the candidacy of Jose Antonio Ocampo. These days though, it could be more prudent not mentioning the endorsement of economists, those who did little to nothing to prevent the crisis, and instead list the endorsement of 100 unemployed… as that could prove to be more significant

April 03, 2012

Sir, Martin Sandbu is absolutely correct when in “Forget break-up: it just needs more parental love” april 3 he writes “It is not the euro’s fault that investors, policy makers and academics failed to spot the dangers”, though one of the current problems is that at most policy makers and academics do not want to acknowledge that.

When Sandbu writes about crazy capital flow that threw money at American house-buyers with no income or Icelandic banks with no experience or European sovereigns – he is referring precisely to those sectors which were subsidized by bank regulators, because their perceived risk of default was low. Had the bank regulators required the banks to hold as much capital/equity when lending to these as they required the banks to hold when lending to small business and entrepreneurs, some other crisis might have happen, but definitely not this one and definitely not one as large.

Me and my constituency!

Me and my constituency!

FT, just so that you know:

Some very few regulators thinking they were capable of managing the bank risks of the world, caused and are still causing immense sufferings, and you Sir are refusing to help holding them accountable for that.

My wicked question to FT

When do banks most need capital, when the risky turn out risky, or when the "not-risky" turn out risky? --- Yep, I think so too!

Videos: The Financial Crisis

My credentials

I have more credentials than most to speak out on the financial crisis and the subprime financial regulations having spoken out loudly about that since 1997...which could be embarrassing to “experts” with weak egos.

Most of those who think of themselves so broadminded when asking for “out of the box thinking” are so very narrow-minded they can only accept what comes, if that outside box lies “within their own small networks”.

Thank you, Martin Wolf

And on July 12 2012 Wolf also wrote that when "setting bank equity requirements, it is essential to recognise that so-called “risk-weighted” assets can and will be gamed by both banks and regulators. As Per Kurowski, a former executive director of the World Bank, reminds me regularly, crises occur when what was thought to be low risk turns out to be very high risk."

And that is something that I of course also appreciate, but that yet makes me curious on why Wolf does not follow up on it.

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I don’t take comments here because I might not have the time to answer (or censor) them and I hate unanswered comments, but, if you want me to comment on something somewhere else invite me and I might show up: perkurowski@gmail.com

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Off-the-blog

One great perk I get from maintaining a blog like this is that it allows me to sustain many conversations with some great journalists who also need and wish to be kept “off-the-record” or as I call it “off-the-blog”.

Yet one wonders

Between January 2003 and September 2006, out of 138 letters to the editor that I sent to the Financial Times before I placed them on this blog they published these 15. Not bad! Thank you FT!

Unfortunately, since then and until the very last day of the decade, out of some 1.000 letters that you can find here, FT published none, zero, zilch. Of course FT is under no obligation whatsoever to publish any of my letters and of course one should not exclude the possibilities that my letters might have quite dramatically gone from bad to worse… yet one wonders.

My usual suspects are:

1. Someone in FT with a delicate ego feels his or her importance diminished by giving voice to a lowly non PhD from a developing country daring to opine on many issues of developed countries.

2. That FT has some sort of conflict of interest with the credit rating agencies that makes it hard for them to give too much relevance to someone who considers they have been given too much powers.

3. The FT establishment had perhaps decided there were only macro economic problems and not any financial regulation problems, and wanted to hear no monothematic contradictions on that.

4. That FT feels slightly embarrassed when someone repeatedly asks the emperor-is-naked type question of what is the purpose of the banks and realizing this was something FT should have itself asked a long time ago.

5. It is way too much oversight for FT to handle.

6. Or am I just supposed to be a living example of one half of the Financial Times motto, namely that of "without favour"Which one do you believe is closest to the truth?

A Blog is born

I like reading The Financial Times, or FT as it is known, and I frequently write letters to the editor and some of them that have indeed been kindly published, for which I feel thankful. But then I realized that all those letters to the editor that for reasons impossible for me to comprehend were never published, were condemned to an eternal silence not of their own fault, and so I decided to, at a marginal cost of zero, to resurrect them and keep them alive, right here.

English is not my mother language so bear with me and you’ll probably note when my letter has been published in FT by its correctness. Swedish is my mother language but I have not written anything serious in it for about 40 years and last time I tried, they just laughed their hearts out because of my démodés. Polish is my father language but, unfortunately, I do not speak a word of Polish, much less write it. Yes Spanish is my language, as I am from Venezuela and although I trust I write in it with great flair, I would still never dream of publishing an article in Spanish without having it edited by my wife.

And so friends here is my Tea with FT blog with my old and new letters to the editor. I hope you will share them with me now and again, and then again and again.

Welcome, and cheers, as I believe they say over there.

Per

PS. Just so that FT does not get too cocky and believe it is my only window to the world, I will now and again publish a letter sent to the editor of another publication.